Global internet advertising expenditure will grow 13% to reach US$205bn in 2017, according to Zenith's new Advertising Expenditure Forecasts, published today. Internet advertising will attract 36.9% of all advertising expenditure, up from 34.0% in 2016. This will be the first year in which more money will be spent on internet advertising than advertising on traditional television (which will total US$192bn).

The sheer scale of internet advertising means its growth rate is slowing. Internet ad spend grew 17% in 2016, down from 20% in 2015, and we expect growth to slow to 13% in 2017, 12% in 2018 and 10% by 2019 (though it will continue to add US$23bn-US$24bn a year). In this environment it is vital that platforms and publishers address advertisers' valid concerns about viewability and brand safety to secure sustainable growth. As the market matures, advertisers need to know for certain that their ads are being actively viewed by real people in appropriate environments.

The Australian advertising market finished 2016 with growth of +3.8%,
slightly higher than Zenith originally forecast. Digital expenditure
continues to be the main driver of total market inflation, with growth
of 15% in 2016. Mobile and online video spend in particular fuelled this
growth in 2016. TV revenue was down -3.9%, continuing to be under
pressure from audience declines and the growth of digital. Print also
continued to decline, although the pace is now starting to slow. Press
declined by 13.4% in 2016 and is now only 11% of total ad spend versus
being more than 25% just five years ago; and magazines were down 17.7%.
Out-of-home grew by +7.9%, benefiting from the increase in supply and
quality of inventory as static panels are converted to digital formats.
Radio also grew by +5.8% with increased spend from big spending
categories like retail and automotive

Says Nickie Scriven, CEO,
Zenith Australia: "Looking forward into 2017 we are forecasting growth
to be at +3.4%. Digital will continue to be the main driver of this
growth. Radio and out-of-home growth will moderate slightly and we
continue to forecast declines in TV and print.

"Our 2017 revenue
forecast is behind 2016's growth but still above overall economic growth
in Australia, which will be around 2% in 2017. Overall consumer
confidence is flat, with consumers having a cautious outlook around
economic indicators like cost of housing, rising commodity costs and
unemployment growth. Despite this, major advertising categories like
retail, automotive, finance and travel continue to have modest growth in
their spend."

Social media to overtake newspaper advertising in 2019

Zenith
forecasts advertising expenditure on social media to reach US$55bn in
2019, overtaking advertising expenditure on printed newspapers, which
will total US$50bn. Social media advertising is the fastest-growing
component of internet advertising - it grew 51% in 2016, and we forecast
it to grow at an average rate of 20% a year to 2019. Newspaper
advertising, meanwhile, is shrinking by 5% a year as circulations
continue to fall. Newspaper ad spend has shrunk every year since peaking
at US$113bn in 2007, and by 2019 will be back to levels last seen in
1985 - and that's without adjusting for inflation. Note that these
newspaper figures only includes advertising in printed editions -
newspapers' online revenues are included in the internet advertising
total.

Long streak of steady global ad spend growth to continue

The
global ad market has grown at a steady pace of 4%-5% a year since the
beginning of the decade, and we expect it to continue to do so through
to 2019. Our forecast for 2017 is for 4.4% growth (unchanged since we
last published our forecasts in December), down slightly from 4.6%
growth in 2016. We forecast another 4.4% growth in 2018, followed by
4.2% in 2019. These rates are slightly below the growth rates that the
IMF forecasts for nominal GDP.

Advertising growth is concentrated in big cities

In
recent years, big cities have been the focus of innovation, migration
and trade. Their populations are younger and have higher incomes than
populations elsewhere, although they also pay a lot more for their
housing. As part of a wider project to identify the value of individual
cities to advertisers, Zenith has conducted a study attributing
advertising expenditure to individual cities, by estimating the amounts
spent targeting the inhabitants of these cities (and their surrounding
metropolitan areas) by advertising in local, national and international
media.

Zenith's report estimates that just ten cities will
contribute 11% of all the growth in global ad spend between 2016 and
2019: in descending order of contribution, New York, London, Los
Angeles, Jakarta, Tokyo, Shanghai, Manila, Beijing, Dallas and Houston.
Last year US$61bn was spent targeting the population of these ten
cities, and we forecast this total to rise to US$69bn by 2019. The top
50 will contribute 27% of total global growth, and the top 250 will
contribute 50%. New York is the world's most important city for
advertising, where US$15bn will be spent this year, followed by Tokyo
(US$13bn), Los Angeles (US$9bn), London (US$8bn) and Chicago (US$6bn).

Says
Jonathan Barnard, head of forecasting, Zenith: "Population numbers,
productivity and disposable incomes are rising faster in cities than
elsewhere. So city dwellers are becoming more valuable for advertisers
seeking growth. Big cities are now driving growth in ad spend."

Says
Vittorio Bonori, global brand president, Zenith: "Internet advertising
has contributed all of the growth in global ad spend since the beginning
of the decade, and has stimulated much of the innovation we've seen in
the market. Innovation is proceeding as fast as ever, and we believe
that this is what will continue to drive brand growth for advertisers."